Credit-Card Delinquency Falls to Lowest Rate Since 1990

Americans are keeping up with their credit card bills better than any time in the past two decades, a reflection of both an improving economy and lingering caution among banks and consumers.

The delinquency rate on credit cards issued by banks fell to a seasonally adjusted 2.41% at the end of the first quarter of this year from 2.47% three months earlier, according to an American Bankers Association report to be published Tuesday. That is the lowest rate since 1990 and well below the 15-year average of 3.87%, the banking group found.

Credit-card-delinquency rates reached a recent peak shortly after the recession ended, when many Americans were out of work and unable to keep up on their bills. Rates have fallen steadily since, buoyed of late by increasing home values and stock prices.

“Consumers brought debt levels down as their incomes and wealth has risen,” said James Chessen, the association’s chief economist. “That put them in a better financial position to meet their obligations.”

Delinquency rates fell in the first quarter for 11 of the 13 loan categories the banking group tracks. The association’s delinquency index for fixed-term loans, including financing for autos, boats and home improvement, fell 0.29 percentage point to 1.70% at the end of quarter, the lowest rate since 2004.

The association only tracks loans and credit cards issued by banks, not those from retailers, credit unions and financial-services companies such as American Express Co.

The data also indicate lenders are being more careful about issuing risky loans in the wake of the financial crisis, while consumers are more cautious about running up big balances. Debt is considered delinquent when the payment is more than 30 days late.

Banks also have aggressively written down bad loans in recent years, Mr. Chessen said. When a bank writes off a loan the debt is no longer counted as delinquent.

It remains to be seen whether delinquency rates can decline further. An improving economy could encourage banks to extend credit to more risky borrowers. Likewise, consumers might be willing to take on additional debt.

That might already be happening. A Federal Reserve report Monday found that the amount of credit extended through revolving loans, mainly credit cards, increased at a 9.3% seasonally adjusted annual rate in May, the fastest growth in a year and second-best monthly gain since the recovery began in 2009.

In addition, rising interest rates could cause borrowers to pay more to take on debt. Higher borrowing costs could make it more difficult to keep up on payments.

That happened for home-equity lines of credit, one of only two categories for which the delinquency rate increased during the first quarter.

Many of those loans have gone from interest-only to fully amortizing, Mr. Chessen said, creating a “payment shock” for some borrowers and pushing up the delinquency rate.

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